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How to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Performance Food Group?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Performance Food Group (PFGC - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.77 a share two days away from its upcoming earnings release on February 8, 2023.
By taking the percentage difference between the $0.77 Most Accurate Estimate and the $0.76 Zacks Consensus Estimate, Performance Food Group has an Earnings ESP of +0.39%. Investors should also know that PFGC is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PFGC is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Bath & Body Works (BBWI - Free Report) is another qualifying stock you may want to consider.
Bath & Body Works, which is readying to report earnings on February 22, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.69 a share, and BBWI is 16 days out from its next earnings report.
Bath & Body Works' Earnings ESP figure currently stands at +5.34% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.60.
PFGC and BBWI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
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How to Find Strong Retail and Wholesale Stocks Slated for Positive Earnings Surprises
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Performance Food Group?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Performance Food Group (PFGC - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.77 a share two days away from its upcoming earnings release on February 8, 2023.
By taking the percentage difference between the $0.77 Most Accurate Estimate and the $0.76 Zacks Consensus Estimate, Performance Food Group has an Earnings ESP of +0.39%. Investors should also know that PFGC is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PFGC is just one of a large group of Retail and Wholesale stocks with a positive ESP figure. Bath & Body Works (BBWI - Free Report) is another qualifying stock you may want to consider.
Bath & Body Works, which is readying to report earnings on February 22, 2023, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $1.69 a share, and BBWI is 16 days out from its next earnings report.
Bath & Body Works' Earnings ESP figure currently stands at +5.34% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.60.
PFGC and BBWI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>